An MP, as well as representatives of the Financial Conduct Authority and the National Economic Crime Centre have called for economic crime to be included in the proposed online harms bill, adding to the number of bodies urging government to recognise the seriousness of financial harm through online fraud in law. 

 

Fraud now makes up 30% of all crime recorded in the UK, and a growing part of investment fraud is initiated online since cold-calling was outlawed in 2019 – through advertisement on search engines, fake websites and social media. In the past 12 months alone, when many people spent more time at home and online, the FCA had 10,000 cases reported to its contact centre, a significant increase on 2019. 

 

Mark Steward, executive director of enforcement and market oversight at the FCA, said a “significant driver” of investment fraud cases is the increase in online advertising of what look like genuine opportunities but are fraudulent or scam like. 

 

“We've seen a significant increase for the past two to three years, but it has really sped up in last 12 months,” he told the Work and Pensions Committee at a hearing for its pension freedoms inquiry on Wednesday. The scammers use online advertising to dupe people with minimal effort. As social media works with ‘straight through’ processing, multiple ads can be run on a daily basis, purporting to offer a variety of opportunities. 

 

The significant rise in online investment fraud and high impact for victims – particularly if they access their pension to make an investment – means a number of agencies and industry bodies are now calling for this to be included in a proposed online harms bill.  

 

 

The proposed bill currently focuses on child sexual exploitation, terrorism, modern slavery and similar offences but excludes fraud. The white paper’s wording suggests that government considers that losses of financial fraud are carried by organisations and companies – as is often the case in banking – rather than individuals, as with pensions and investment. 

 

Conservative MP Siobhan Baillie, who sits on the Work and Pensions Committee, has now lent her support to including financial harm in the proposed bill and urged others to do the same. 

 

“Victims, and also insurance companies and honest actors in the pension industry, will expect government to use every legislative tool in the box to prevent scams,” she said during the committee hearing, adding: “We should be using that bill really fully as a prevention Act, and I would love it if we could ram that home from all of our witnesses today.” 

 

 

Steward highlighted that social media firms are in an unregulated space when it comes to online fraud, calling it “a serious source of harm for consumers considering what to do with their pensions”. 

 

He said online scam ads normally cite false addresses, name people who do not exist, from firms claiming to be incorporated that have never been incorporated in the UK, or if they have their names are fictitious. Even adverts from firms on the FCA’s warning list can be found. 

 

"Social media should not show firms where we’ve raised alarm bells," said Steward. Similarly, ads are often from clone firms of genuine FCA-registered firms. 

 

“These crime firms should be spottable by social media. If we can spot them, social media can as well. They should not be advertising and searchable on social media,” he said. 

 

He noted that the FCA has no regulatory power over social media firms, and while it is negotiating with these firms and they are reacting positively, any changes they are making are not having a big effect, as online scams are still increasing.  

 

Inclusion in the online harms bill would send an important signal to social media firms and search engine providers, he thinks. 

 

“Anything that might recognise that this is a serious enough harm to warrant inclusion in the online harms bill would be a really good message from the government,” he said. 

 

Graeme Biggar, director general of the NECC, said the proposed bill “is quite high level and really good in lots of ways” concerning terrorism and child sexual exploitation, but it “has put this at the forefront of the bill” while not including economic crime. Biggar said he “would like to put this at same level”. 

 

"We would like these companies to have a lot more responsibility” in relation to scam adverts and websites, and “to work better with us than they do at the moment”. 

 

 

With their support of including financial harm in the proposed bill, Biggar, Steward and Baillie are not alone. At a committee hearing for the same inquiry in September last year, Tim Fassam, director of government relations and policy at the Personal Investment Management and Financial Advice Association, also suggested including financial harm in the proposed bill. Lawmakers “have explicitly excluded financial harm, we believe that’s the wrong decision”, he said at the time. 

 

Other industry representatives have previously highlighted the enabling role of large digital firms providing services like Google, LinkedIn or Twitter in investment fraud, as well their lack of responsibility. 

 

In October, Peter Hazelwood, group financial crime risk director at provider Aviva, told the committee that online firms were a “key enabler” and “accelerant” of scams. He pointed out that genuine financial services firms and regulators are having to pay for warnings and prevention ads – on the same tech platforms which also take money from criminals for putting up fraudulent ads, meaning the platforms profit twice from the crime.